Research On The Impact Of Non-interest Income On The Performance Of Commercial Banks In China

In recent years, with the strengthening of capital constraints, accelerating of financialdisintermediation and increasing intra-industry competition, traditional interest incomebusiness of China’s commercial banks faced with severe challenges. Forced by the pressureof spreads narrowing, commercial banks have taken measures to vigorously develop thenon-interest income business and improve the proportion of non-interest income. But nowdomestic commercial banks are still have no clear and unified view for the concept ofnon-interest income. The confusion in concept between non-interest income, intermediatebusiness income and off-balance sheet business income also blurred the scope andclassification of non-interest income. In addition, banks actively expand non-interest incomeis based on a premise that improving non-interest income can help upgrade the performanceof commercial banks. In fact, the overall level of performance of commercial banks in Chinais not high and traditional interest income still is the important source of income in the bank.Besides non-interest income accounted for still lower and still lack sufficient favorableevidence to validate this premise.Firstly, based on previous studies, cleared the definition and classification ofnon-interest income of commercial banks including fee and commission income, investmentincome, net income trading and other business income of four parts. Through the comparewith intermediate business income and off-balance sheet business income, clarify the scopeof them which the range of non-interest income business are the widest, then followed bythe intermediate business income, finally, off-balance sheet business income.Secondly, based on the status of non-interest income of China’s16listed banks, and thencontrast the non-interest income of commercial banks in China and the United States，steady increasein the total amount of bank non-interest income but the proportion is still low. Fee andcommission income is still the main source of non-interest income while investment incomeand several other non-interest income businesses need to be further developed.Thirdly, based on the study sample of16listed banks, studied the relationship betweenthe commercial banks non-interest income and the level of bank profitability byconstructing a panel data model and regression analysis. The regression results weresignificant positive correlation between non-interest income and the level of bankprofitability and net fee and commission income was significantly positively correlated with the level of bank profitability. It did not show a significant correlation between investmentincome, several other non-interest income and bank performance.Lastly, effective countermeasures and suggestions to improve the non-interest incomeof commercial banks in China are put forward. In order to further enhance the positivecontribution of non-interest income, commercial banks should enhance the expansion ofnon-interest income business to a strategic height up and increase the proportion of businessassessment, reasonable to adjust the internal structure of non-interest income, persist inpromoting the product and service innovation and efforts to build the brand characteristics,through a series of human resources strategy that the introduction of high-quality personnelto improve the training system and mechanisms, then to enhance the competitiveness andprofitability of commercial banks in China and to achieve the commercial bank ofsustainable development.